Bitcoin Investment Guides

Bitcoin Brokers: What You Need to Know

Bitcoin Brokers

OTC Bitcoin BrokerBMJ RatingReputationLocationFeesAuxiliary ServicesRegulated
Genesis Trading5/55/5U.S.Spread Above XBX Bitcoin IndexOut of Hours TradingYes
ItBit4.5/55/5U.S.0.10%All USD Funds Held Are InsuredYes
Cumberland Mining4/54/5U.S.Brokerage Fee Included in Agreed PriceAdvisoryYes
BitStocks4/54/5U.K.Brokerage Fee Included in Agreed Price, 25% of Profit on "Advisory" TradesAdvisory & ResearchNo
Richfund3/53/5China2% on USD Trades, Fee Varies for Other CurrenciesMarket-Making, Exchange ArbitrageNo

If you’ve decided that you want to make a substantial investment in bitcoin, you will most likely be better off using a bitcoin broker to execute your trade, as opposed to placing several buy orders at various digital currency exchanges yourself.

In this guide, you will be introduced to the leading bitcoin brokers as well as everything you need to know about what to look for when choosing a broker that is right for you and your bitcoin investment needs.

The Over-The-Counter (OTC) Bitcoin Trading Market

Outspoken entrepreneur and bitcoin evangelist Vinny Lingham notes:

“The OTC market for Bitcoin is bigger than the exchange market. Exchanges set the price but large trades don’t happen there.”

The big bitcoin investors, those trading from $500,000 to several millions worth of bitcoin, prefer to use OTC brokers instead of dealing simultaneously on different exchanges that have varying liquidity. This is largely due to bitcoin’s illiquidity compared to traditional asset classes such as blue chip stocks and government bonds. In theory, the negotiated price with an OTC broker should always be better than the average price you would get by purchasing your bitcoin on exchanges yourself.

Therefore, if you intend to make a large investment in bitcoin or intend to trade in and out of the digital currency in high volumes to benefit from short-term price movements, you will most likely receive better entry and exit levels when using an OTC bitcoin broker.

5 Leading OTC Bitcoin Brokers

Genesis Global Trading

New York-based Genesis Global Trading provides two-sided liquidity for digital currencies on a daily basis. The company was formerly SecondMarket’s Trading Division and is owned by leading bitcoin venture capital firm Digital Currency Group. Genesis has been offering its bitcoin brokerage services since 2013, which makes it one of the longest-standing OTC bitcoin brokers in the market. Due to its ownership by the DCG, it is also considered one of the most reputable.

The minimum transaction size when trading with Genesis is $25,000 and it offers its services from Monday to Friday, 8 am to 6 pm and observes NYSE’s holiday schedule. However, trades can also be executed on a per case basis outside of normal trading hours.

Genesis charges no fixed percentage fee for its trades. Instead, it offers its customers a fixed spread above the XBX Bitcoin Index, which includes its brokerage fee. Genesis also acts as an OTC broker for regulated digital currency investment vehicles such as Grayscale’s Bitcoin Investment Trust and the Ethereum Classic Investment Test.

itBit 

New York-based itBit is a digital currency exchange that launched it 2013. The exchange also offers OTC bitcoin trading service targeted at high net worth individuals and businesses that want to transact in a minimum of 100 bitcoin. itBit charges a 0.1 percent flat fee on each OTC trade and offers same day settlement to its customers. itBit’s OTC trading desk has clients in over 100 countries and the company is a regulated bitcoin exchange in the State of New York.

Cumberland Mining

Cumberland Mining, a DRW Holdings LLC subsidiary, is another US-based bitcoin broker that transacts in institutional-sized trades. The Chicago-based company provides two-way liquidity in bitcoin and other digital currencies for high net worth individuals and enterprises.

Bitstocks

London-based Bitstocks was launched in 2016 to provide bitcoin liquidity to high net worth individuals as well as institutional investors. The company requires you to make a minimum deposit of £5,000 ($6,500) and offers both an OTC brokerage services and an advisory service. For OTC trades, the company’s commission is built into the execution price, similarly to the way Genesis Global Trading handles it. If you want to also benefit from the brokerage’s advisory services, however, you will have to pay a 25 percent performance fee on the profit you make on your trades.

As bitcoin is not regulated in the U.K., Bitstocks has decided not to seek regulatory approval from the Financial Conduct Authority, but instead keeps a close eye on regulatory developments to stay fully compliant with the country’s laws and financial regulations.

Richfund

China-based Richfund claims to be the largest bitcoin hedge fund in the world. Richfund conducts mining operations and automated arbitrage, and offers OTC trading services for high net worth individuals. The company was founded in 2013 and has since been a key liquidity provider on Chinese exchanges. OTC trade sizes tend to range from 1,000 to 5,000 BTC and most of its clients are based in Asia.

Which Broker is Right for You? Bitcoin investment

When choosing your bitcoin broker, consider:

Reputation: The reputation of your potential broker is the most important of the factors to consider. If you are going to trust someone to buy and sell bitcoin for you for several hundred thousand dollars or more, you need to be able to trust the intermediary. A good first step is to check whether the broker you intend to use is regulated. The next step is to assess the broker’s reputation, which can usually be determined by who owns and runs the operation and by reading unbiased reviews about their services. Not all bitcoin brokers are regulated financial services companies, because bitcoin itself is not regulated. Having said that, ensuring that the broker you intend to use has a good reputation among its existing customers and has a clear and public ownership structure is key.

Fees: Almost equally as important are the fees the broker requires. Brokers always charge a commission, so you want to choose one that charges a reasonable fee. This is especially the case if you intend to trade actively, because excessive commissions eat into your returns.

Time zone compatibility: Finding a broker within your time zone enables you to execute trades during normal business hours. Hence, if you are in the U.S., you are probably better off trading with a US-based broker as opposed to a UK- or Asia-based one. Having said that, if you intend to trade a lot and you also want to have access to European trading hours, for example, setting up an account at one of the London-based OTC brokers as well might not be such a bad idea.

Excellent customer service: Finally, you also want your broker to provide excellent customer service.It is never a good sign if you call a broker and no one answers or if it takes a long time to get a reply to important emails. To find out whether a bitcoin broker offers good customer service, you can either read unbiased reviews online or simply try them out and see whether their customer service standard is up to what you expect from your broker.

The Bottom Line

If you are considering heavily investing in bitcoin, an OTC broker may be your best choice. The five brokers mentioned above represent some of the best OTC brokers available. To choose among them, consider their reputation, their customer service offerings, and their fee structures for commissions.

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